Michigan Eyes Takeover of City Near Detroit

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Bloomberg Photo Service 'Best of the Week': Rick Snyder, governor of Michigan, sits for a photograph in New York, U.S., on Friday, July 26, 2013. Snyder said he hopes to "get through" the Detroit bankruptcy filing by "the fall of next year." Photographer: Scott Eells/Bloomberg *** Local Caption *** Rick Snyder

CHICAGO — Michigan Gov. Rick Snyder has appointed a team to review the finances of the struggling city of Lincoln Park, located outside Detroit in Wayne County.

The announcement comes two weeks after Snyder declared fiscal emergencies in two nearby communities, Royal Oak Township and Highland Park.

It's the second in a series of steps that could lead to a state takeover under Michigan law.

A state board last month determined that the city faces "probable finance stress" following a preliminary review by the Department of Treasury. The new review team must report its findings to Snyder within 60 days.

If the team finds a fiscal emergency, and Snyder agrees, the city has four options, including entering into a consent agreement with the state, the appointment of an emergency manager, or asking for permission to file Chapter 9.

Located in southeast Michigan in Wayne County, Lincoln Park has suffered steep drops in property tax revenues over the past few years. The city has seen its taxable value fall 31% over the last four years, and its general fund revenue decline to $20.3 million in 2013 from $24.6 million in 2009, according to the state. Property taxes make up 60% of the city's general fund revenue.

The state's preliminary report found that Lincoln Park transferred $2.5 million from its water and sewer fund into its general fund in fiscal 2013 to make its annual pension payment. The city has also stopped making payments to SunTrust Bank, which has sued the city for the money.

The city's two pension funds have also seen major drops over the last 10 years. The employees' pension plan has fallen to a 28% funded status as of last year from 70% in 2003, according to the state. The police and fire fund's status has dropped to 35% in 2013 from 101% in 2003. Altogether the city has a $69 million unfunded pension liability, Michigan officials said.

The review team is made up of: Michael Krouse, administrator, state finance division within the treasury department; Doug Ringler, office of internal audit services within the state budget office; Steve Schiller, a former teacher is who now a consultant to Muskegon Heights and Highland Park school districts' emergency manager; Max Chiddister, a former Indiana mayor and president of Chiddister and Associates; and Frederick Headen, legal advisor for the Michigan treasury department.

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